Price elasticity of supply (PES)

In 2014, the World Trade Organisation required China to remove its export quotas on rare earth metals, which are used in smartphones, laptops, tablets and other electronic equipment. China provides 90% of the world’s rare earth metals and is also the world’s biggest user. The supply of these metals is inelastic, so any change in their price alters the cost of producing a range of products.

Feb/March 2016

The table illustrates how a rise in market price from $\$5$ to $\$6$ affects the supply of mobile (cell) phones. Which of the following statements about the price elasticity of supply of mobile phones is correct?

Feb/March 2019

The table presents the supply schedule for a good. What is the price elasticity of supply when price rises from $1$ to $3$?

Feb/March 2021

Study the source material closely before you answer Question 1. Denmark is a North European, high-income country. Danish people enjoy high living standards and relatively long leisure time. They use this time in many different ways, such as cycling, jogging and playing golf. Danish workers are employed across a variety of industries. Denmark was once a major shipbuilding nation, but that industry is now shrinking. Ships have substitutes in other forms of transport. In addition, it may be possible to delay buying ships, they take a long time to build and they are costly to keep in storage. By contrast with shipbuilding, the Danish toy industry has expanded in recent years. Denmark’s shipbuilding and toy industries belong to the private sector. Changes in the public sector also affect Denmark’s economic performance. Table 1.1 shows Danish government spending and GDP between 2015 to 2021. Denmark is strongly involved in international trade. It usually records a surplus on the current account of its balance of payments. International trade influences the availability of goods in the country and its foreign exchange rate. It also affects the country’s GDP and employment level. As in most countries, the way people work in Denmark has altered in recent years. More people now spend at least part of their working hours working from home. This change is expected to influence productivity and help firms retain their workers. Households may be encouraged to move away from cities and purchase larger homes. There may also be changes in demand for transport, demand for food sold in city centres and firms’ need for office space.

Feb/March 2024

A product has a price elasticity of supply of $+2$. A change in price causes the quantity supplied to rise from $100$ units to $120$ units. What change in price occurred?

May/June 2015

As a result of the price rising from $\$5$ per kilo to $\$6$ per kilo, a chicken farmer increased supply from $400$ kilos to $500$ kilos per week. What is the price elasticity of supply?

May/June 2017

The diagram illustrates the supply curve for a good. What is the price elasticity of supply as the price rises from $\$2$ to $\$4$?

May/June 2018

The diagram illustrates the supply curve for a good. What is the price elasticity of supply when the price increases from $\$2$ to $\$4$?

May/June 2018

The diagram illustrates the supply curve for a good. Calculate the price elasticity of supply when the price increases from $\$2$ to $\$4$?

May/June 2018

Historically, the people of Iceland relied mainly on farming and fishing for their income. By 2008, the Icelandic economy was also extremely reliant on its financial sector. Even so, the country is now widely recognised around the world for tourism. Although the primary sector now provides employment for only a small share of the labour force, it still has a very strong influence on policy decisions. For instance, the fishing industry is subject to many government rules. Restrictions on foreign investment in the fishing industry both protect domestic fishermen and preserve the fish stock in Icelandic waters. Regulation also influences the price elasticity of supply (PES) of fish. The quantity supplied usually changes by a smaller percentage than the change in price. From 2002 to 2007, Iceland’s average yearly economic growth rate was 5%. In 2006, Iceland’s Gross Domestic Product (GDP) was US$17 billion and in 2007 it rose by 9%. This rapid growth was caused by greater access to bank loans and by rising incomes in its main trading partners, including the European Union (EU) and Norway. It was during this time of fast economic expansion that the financial sector became a major part of the Icelandic economy. The leading commercial banks helped to increase consumer spending and large construction projects, both of which raised the standard of living of Icelanders. In addition, commercial banks also expanded into overseas markets. These international markets grew quickly between 2002 and 2007, which brought more money back into Iceland’s financial sector. However, Iceland experienced a major financial crisis in 2008, when all three of its main privately owned commercial banks collapsed. This caused total output to fall and unemployment to rise. Fig. 1.1 shows the economic growth rate and unemployment rate in Iceland from 2002 to 2014. Fig. 1.1 Economic growth rate and unemployment rate in Iceland from 2002 to 2014. Recovery from 2010 to 2017 was first made possible by loans from international organisations. More recently, it was also supported by successful tourism campaigns that have turned Iceland into a 'must-see' place for tourists.

May/June 2019

As the price rose from $\$5$ per kilo to $\$6$ per kilo, a farmer raised supply from $400$ kilos to $500$ kilos per week. What is the price elasticity of supply?

May/June 2021

When the price rises from $5\ \text{per kilo}$ to $6\ \text{per kilo}$, a farmer raises supply from $400$ kilos each week to $500$ kilos each week. Calculate the price elasticity of supply.

May/June 2021

As a result of price rising from $\$5$ per kilo to $\$6$ per kilo, a farmer increased supply from $400$ kilos to $500$ kilos per week. What is the price elasticity of supply?

May/June 2021

A firm has a high price elasticity of supply for its product. What does this mean?

May/June 2022

Which formula is used to calculate price elasticity of supply?

May/June 2023

In the diagram, which supply curve represents perfectly inelastic supply?

May/June 2023

When the price rose from $\$5$ per kg to $\$6$ per kg, a farmer raised supply from $400$ kg to $500$ kg each week. What is the price elasticity of supply?

May/June 2024

A product has a price elasticity of supply (PES) of $1.0$. This product is priced at $10 and the quantity supplied is 200 units. If the price of the product rises to $11, by how many units will the quantity supplied rise?

May/June 2024

The price elasticity of supply (PES) of coffee is measured as $+0.2$ in the current year and $+2.0$ over the long run. Why is the PES of coffee greater in the long run?

May/June 2025

Which good is likely to have the supply that is most price elastic?

May/June 2025

The diagrams illustrate the supply curves for four firms. Which firm has a price elasticity of supply that is more than zero but less than one?

May/June 2025

The table presents the quantity suppliers are prepared to provide at different price levels. If the price rises from $120 to $180, what is the price elasticity of supply?

Oct/Nov 2019

It is forecast that electric driverless cars will be on the roads by 2030. They have already been trialled on roads in some cities, including Pittsburgh in the USA. It is believed that driverless cars will cut accidents, bring lower repair costs and produce less pollution. Initially, supply of driverless cars may be greater than demand, but they are expected to become popular quickly. As more driverless cars are used, demand for bus travel and petrol stations may fall, and some taxi drivers may become redundant. By contrast, driverless cars will give more people, including the elderly, access to transport, so demand for out of town restaurants and entertainment venues is likely to rise. It has been predicted that the technology being developed for driverless cars will make their supply elastic. It is forecast that an 8% rise in the price of driverless cars would lead to a 20% rise in quantity supplied. Technological progress and the substitution of workers by machines are forecast to eliminate 80 million jobs in the USA. Job losses are also expected in other countries, and trade unions are likely to be less able to resist because membership is falling and governments are reducing the power of trade unions. Jobs thought to be at risk include accountants, train drivers and financial advisers. Demand for workers in other occupations, including doctors and dentists, may rise, but there is a danger that unemployment could increase. The better educated workers are, the easier it is for them to move from one occupation to another. Table 1.1 shows education spending as a percentage (%) of GDP and the unemployment rate in selected countries. Jobs selling houses and flats may fall, but the demand for building workers is expected to increase. Some people welcome house building in their area, while others oppose it.

Oct/Nov 2019

During May 2017, the price of olive oil climbed by more than 10%. This happened because drought affected Greece, Italy, Spain and Tunisia, the main producing nations. Worldwide supply was predicted to drop by 14% in 2017. Demand for olive oil decreased in Europe, but increased in several other countries, including Australia, Brazil and China. In some countries, some staple foods such as bread and rice are taxed, whereas in other countries they are subsidised.

Oct/Nov 2019

The price elasticity of supply for a good is $2$. The good’s price then decreases by $10\%$. What change occurs in quantity supplied?

Oct/Nov 2020

The diagram illustrates the supply curve for a good. What is the price elasticity of supply when the price increases from $10$ to $12$?

Oct/Nov 2020

Cotton and gas are two of Uzbekistan’s leading industries. Uzbekistan ranks as the world’s seventh largest cotton producer and the fifth largest cotton exporter. The Uzbek government has attempted to affect the cotton industry’s price elasticity of supply. It has also almost eliminated child labour in cotton production. In 2018, gas output rose by 7% and the average cost of gas production declined.

Oct/Nov 2021

Which factor can affect the price elasticity of supply of a product?

Oct/Nov 2022

Technological progress has altered the ways trees (wood) are felled, moved and used in making furniture, such as tables. Wood is in inelastic supply. Wood may be supplied under every economic system. However, public goods are not supplied in a market economic system.

Oct/Nov 2022

Freshly constructed houses usually have an inelastic supply. The government wants supply to become more elastic by easing building regulations. Why is the government unlikely to succeed in this straight away?

Oct/Nov 2023

A worldwide pandemic leads to a drop in demand for air travel. Which figure for the price elasticity of supply of air travel would make the number of tickets sold for air travel fall by the greatest amount?

Oct/Nov 2023

In some countries, droughts reduced the wheat supply. This pushed wheat prices up, creating a chance for wheat producers in other countries to raise their output. Why could the price of wheat remain high in the year after the drought?

Oct/Nov 2023

The markets for four products are each in equilibrium. The table shows the price elasticity of supply (PES) value for every product. For each product, demand moves rightward by 5000 units at every price. Which product will experience the greatest rise in price?

Oct/Nov 2023

What factors would make the price elasticity of supply (PES) of a product greater?

Oct/Nov 2023

One factor behind very high house prices in cities such as Hong Kong, London, and New York is the low price elasticity of supply of houses. In some of these cities, trade unions are campaigning for housing that is more affordable for workers. Governments are also attempting to introduce a range of microeconomic policy measures to bring house prices down. Furthermore, the stability of the housing market can influence how effective monetary policy is.

Oct/Nov 2023

In the US, the supply of meat from emus, a large bird, is price-elastic. More recently, US farmers have moved from keeping other livestock and growing crops, which has altered their demand for labour. Their decisions are affected by government subsidies for producing chosen food items. Some people are unwilling to work on farms because they believe rural living standards are low.

Oct/Nov 2023

A firm is provided with the following supply schedule. What is the price elasticity of supply of the good when the price rises from $5 to $10?

Oct/Nov 2024

In the diagram, which line indicates perfectly inelastic supply?

Oct/Nov 2024

If the price of butter rose by 10%, and the quantity supplied of butter rose by 20%, what is the price elasticity of supply (PES) for butter?

Oct/Nov 2025

The price of fish has risen from $3.00 to $4.80. The quantity supplied of fish has risen from 100 units to 130 units. What is the price elasticity of supply (PES) of fish?

Oct/Nov 2025